Main points
- Individual entrepreneurs may lose their pensionable service if they do not pay taxes and do not submit appropriate reports.
- New tax requirements may force entrepreneurs to close businesses en masse, which is due to the IMF's requirement to establish VAT for entrepreneurs with a turnover of over 1 million hryvnia.
Why self-employed individuals are left without a pension / Photo by Pexels
Sometimes sole proprietors have problems with pensionable service, when despite years of working in their own business, they have nothing to retire with. As it turns out, the reason is a business error related to paying taxes.
Why can individual entrepreneurs not have their experience counted?
The resource “On Retirement” discusses how the status of an entrepreneur affects future pensions.
Yes, having a registered individual entrepreneur is not a basis for counting insurance or pension experience.
Please note! Insurance experience is not formed based on the status of the entrepreneur, but on contributions to the insurance system.
And for work experience to be counted, you need:
- pay a single social contribution (SSC);
- submit appropriate reports.
At the same time, a different system of accumulation and calculation of seniority was in place until 2004. Currently, because of this, some categories of pensioners lose their actual seniority.
At that time, there was no personalized accounting of insurance contributions. Often, entrepreneurs worked and did not know that they had to pay separate contributions to the Pension Fund. This also affected businesses:
- who worked under a patent;
- who were on a fixed tax;
- who paid tax without pension contributions.
Important! Previously, the basic (fixed) tax did not always include a contribution to the Pension Fund. That is, the contributions did not affect the calculation of the pension. There was no reason for this, because the PFU did not receive its share of the general tax.
Tax benefits also led to the loss of insurance experience. These are the following “bonuses”:
- zero payment of social security contributions in the 2000s;
- payment of half of the contribution;
- quarantine benefits during COVID-19;
- benefits during martial law for business employees.
In these examples, the state offered to fully or partially waive the SSC. From an economic point of view at that moment, this was probably a favorable decision for businesses.
However, if we analyze the impact on the future: there is no payment of the Social Security Contribution, there is no contribution from it to the Pension Fund, and therefore there is no seniority for a pension.
What is known about business operations in 2026?
At the request of the IMF, Ukraine needs to introduce VAT for businesses with a turnover of over 1 million hryvnia. Although the Verkhovna Rada has not yet voted for the update for individual entrepreneurs, business closures are already common. This is due to the fact that the program can become unprofitable for individual entrepreneurs.
People's Deputy Yaroslav Zheleznyak wrote that, according to preliminary estimates , after the implementation of the initiative, the Ukrainian budget will receive an additional 20 billion hryvnias. At the same time, according to the politician himself, the figures are exaggerated.
If the bill with the IMF's requirement is adopted, it will mean that from January 1, 2027, business will have to work according to new algorithms.
The system will collapse and people will have to be taught for a long time,
– noted Zheleznyak.
He added that the new tax law is a significant change for 252,000 entrepreneurs. And considering the number of businesses that need to be “retrained,” it is a technically very complex process.
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What else do you need to know about taxes for businesses?
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Entrepreneurs should be careful, as scammers are sending fake messages claiming to be from the State Tax Service. The letters contain links to dangerous resources where you can “catch a virus and open access to your computer to other people.”
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In fact, all letters from the tax office come from the domain @tax.gov.ua, which can be additionally checked in the taxpayer's electronic account.
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And the main difference between individual entrepreneurs of groups 2 and 3 lies in the different amounts of the single tax and military levy. In particular, you should know about the “simplification”, which makes it easier to fill out reports and reduces the tax burden.